How has the coronavirus affected debt collection laws?
Many states temporarily forced commercial debt collectors to stop collecting on debts and wage garnishments during the early months of the pandemic. However, with stay-at-home orders ending across the country and many businesses resuming near-normal hours, states may not renew the pause on collection activity.
You can browse consumer protections by state on the National Consumer Law Center (NCLC) website to see what provisions your state government still has in place. You can also contact your state attorney general and check local news outlets to find current information on debt collection moratoriums in your area.
Got a call from a debt collector? There are several national and state laws in place to protect consumers and ensure debt collection companies are acting fairly. Knowing what your debt collector can and can’t do can help you spot when you’re being harassed and avoid common scams.
The Fair Debt Collection Practices Act
The main law that protects consumers is the Fair Debt Collection Practices Act (FDCPA), though many states have other laws to add additional protections. If you think a debt collector is violating the FDCPA, file a complaint against it with the Federal Trade Commission (FTC).
What is the FDCPA?
The FDCPA is a federal law that prevents debt collectors from harassing or misleading consumers. It covers debt collection for mortgages, credit cards, personal loans, medical debt and other types of debt for personal use.
How does it protect me?
Debt collectors are only allowed to contact you between 8 a.m. and 9 p.m.
Debt collectors are prohibited from calling you at work if you asked them not to.
Debt collectors are only allowed to talk to you or your attorney unless they have permission from a court. Generally, they must communicate with your attorney if you have legal representation.
Debt collectors can’t use obscene language, threaten violence or repeatedly call you for no reason.
If you send a written letter to a debt collector asking it to stop contacting you, it can only reach out to say there will be no more contact or say that it’s taking legal action against you.
Debt collectors aren’t allowed to claim they’re an attorney, imply they’re affiliated with a government agency or credit bureau, or tell you you’ll have your wages garnished or go to jail. It also doesn’t allow them to operate under another business’s name or otherwise falsely represent themselves.
If it doesn’t provide details about your debt right away, a debt collector must send a written notice within five days of contacting you. It must include:
How much you owe.
The original creditor’s name.
An explanation that you have 30 days to dispute the validity of the debt.
If you don’t think it’s valid, the debt collector is required to send you a judgement or other verification of your debt. It’s not allowed to communicate with you by postcard.
Debt collectors aren’t allowed to collect more than the amount you owe according to your original contract. It also can’t threaten to collect any property that you haven’t put up as collateral.
Want to pay off your debt with a check postdated more than five days in advance? Debt collectors are required to give written notice that they intend to deposit a postdated check between three and 10 business days before they make the deposit.
They also aren’t allowed to deposit or threaten to deposit a postdated check early.
A debt collector is only allowed to sue you in the judicial district where you signed the contract or where you live.
If it’s suing to collect collateral you put up to back a loan, it can only file a lawsuit in the judicial district where that property is located.
Before you sign up with a debt relief company
Debt relief companies typically charge a percentage of a customer’s debt or a monthly program fee for their services. And they aren’t always transparent about these costs or drawbacks that can negatively affect your credit score. You might pay other fees for third-party settlement services or setting up new accounts, which can leave you in a worse situation than when you signed up.
Consider alternatives before signing up with a debt relief company:
Payment extensions. Companies you owe may be willing to extend your payment due date or put you on a longer payment plan if you ask.
Nonprofit credit counseling. Look for free debt-management help from nonprofit organizations like the National Foundation for Credit Counseling.
Debt settlement. If you can manage to pay a portion of the bill, offer the collection agency a one-time payment as a settlement. Collection agencies are often willing to accept a lower payment on your debt to close the account.
Debt collector laws by state
While each state must follow the FDCPA, most have additional laws that regulate how debt collectors interact with consumers. Use the table below to learn how your state protects you.
I feel like my rights were violated. What can I do?
If you believe a debt collector has violated the law, the next step is to file a complaint. If it’s a FDCPA violation, you can file a complaint with the FTC. Otherwise, you can file a complaint with your state attorney general’s office.
You can file a complaint with the FTC on its website or by calling 877-382-4357. Here’s how to get started online:
Click Credit and Debt from the list of categories.
Complete the questions with information about yourself and the debt collector.
The FTC shares complaints with law enforcement and contacts the business in an attempt to get the issue resolved. If you think you have a real case for an FDCPA violation, you can also sue the debt collector for damages like lost income. Even without damages, you could be awarded up to $1,000 to cover attorney fees and other costs associated with the case.
If you join a class action lawsuit with other consumers, you could recover money for damages up to $500,000 or 1% of the debt collector’s net worth — whichever is less.
Each state’s attorney general office has its own process for filing a complaint. You can typically get more information about the complaint procedure by visiting its website. Often, you can file a complaint online or over the phone.
Federal and state debt collection regulations are meant to ensure fair measures are taken for both the borrower and the collector. Familiarizing yourself with these laws can not only help you navigate the debt collection process, but can also help you avoid scams.
No, the FDCPA only applies to individuals. There currently aren’t any federal laws governing the commercial debt collection industry. Instead, you’ll need to look into your state’s regulations.
No, the FDCPA only applies to debt collection companies, not your original creditors. However, it might be in violation of one of your state’s debt protection laws. Check with your state’s attorney general office for more information on how you’re protected.
It depends on your state, but typically you have between four and six years before a lender or debt collector is required to stop requesting repayment.
Anna Serio is a trusted lending expert and certified Commercial Loan Officer who's published more than 950 articles on Finder to help Americans strengthen their financial literacy. A former editor of a newspaper in Beirut, Anna writes about personal, student, business and car loans. Today, digital publications like Business Insider, CNBC and the Simple Dollar feature her professional commentary, and she earned an Expert Contributor in Finance badge from review site Best Company in 2020.
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